Tuesday, 21 July 2015

The Next Step for Digital Currencies

photo of Charles Eisenstein
Charles Eisenstein
10th September 2014

Blogger Ref http://www.p2pfoundation.net/Transfinancial_Economics


“With these learnings from the Bitcoin experiment, I would like to propose a new model for digital currency. The question is how make the issuance of and access to money egalitarian on the one hand, yet also regulate the money supply in an organic, decentralized way.”

Today’s national and supranational currencies have become a blight on this planet. Created through interest-bearing debt, controlled by financial elites, tracked by the surveillance state, and necessitating endless growth, money as we know it is a primary agent of inequality, injustice, and ecocide.
What to do? One response is to attempt to transform the money system; another is to create alternatives that may supplant it when, as is inevitable, the present system stops working.
The most famous of these alternatives is the digital currency Bitcoin. It was designed to mimic gold in both its sourcing and its anonymity. To “mine” the bitcoins, one must solve computationally demanding numerical problems. This makes bitcoins hard to get, just like gold; total supply is limited as well. Also like gold, bitcoin transactions are designed to be anonymous: one can verify the authenticity of a bitcoin, but cannot trace its transaction history to an identifiable person.
The modeling of Bitcoin on gold was done for at least three reasons:
1. To separate money creation and the regulation of the money supply from politics. In theory, no interested party can manipulate the creation of currency for its own political or financial benefit.
2. To ensure it is non-inflationary. A limited number of bitcoins can be mined, limiting the money supply and making long-term inflation impossible. The hope was that the value of bitcoins would be stable.
3. To allow users to be independent of government control in their economic lives. The creators hoped that “no government will be able to control Bitcoin.” Collection of taxes and the tracking of citizens’ purchases and income would be impossible – a blow to the surveillance state. Furthermore, as with gold coins in the basement, there is no way short of stealing passwords for a third party (such as a government) to know how much bitcoin wealth someone possesses.
The results have been mixed. First let us congratulate Bitcoin on its success. Out of the hundreds of new currency models that have been proposed, Bitcoin is among the few actually in wide use. Some of this success might be attributable to its novelty and to its ideological associations with libertarianism, which encourage people to use it as a statement of political and personal identity. Nonetheless, one can make relatively bug-free, secure transactions with it, totally independent of any national currency. That is quite an accomplishment. If nothing else, Bitcoin has expanded our vision of what is possible. I hope you share my gratitude for these brave and visionary inventors.
Bitcoin has also experienced its share of difficulties, some of which are well-known. For one thing, it is not as immune to government interference as its designers had hoped. Even if it would be hard to enforce tax laws on bitcoin transactions, it isn’t always impossible either when physical or virtual goods are delivered, and in any event, any doubts about its legality drive away many potential users and consign Bitcoin to a marginal status. Indeed, when governments began issuing rulings against Bitcoin, its market value plummeted.
That leads to a second difficulty. Bitcoin’s value has been anything but stable: it has in fact exhibited dramatic fluctuations and commodity bubble behavior. This makes it a questionable as a currency. The fluctuations are mostly due to speculation, which is quite natural when supply is fixed and demand is upredictable. A related and more serious long-term problem is deflation and hoarding. When the supply of money is fixed, it is unable to respond to the economy’s demand for money. If demand for money increases, so does the value of the currency. Goods become cheaper and cheaper. You might think that is a good thing, but the problem is that money becomes correspondingly harder to obtain. People with money hoard it, expecting its value to rise. The result is a slowdown in economic activity and the concentration of wealth in fewer and fewer hands. In a system with a central bank like the Fed, the monetary authorities can respond by adding money to the economy. Alternatively, the government can redistribute wealth away from those who are hoarding it and to those who need it through taxation and stimulus spending. Neither of these options is available to Bitcoin. The system is designed to make that impossible.
One of the alternatives to Bitcoin, Freicoin, has an anti-hoarding mechanism built into it. In the Freicoin system, money is subject to a negative interest or “demurrage” charge, so that the nominal value of currency decreases by 5% a year. For example, if you have 100 freicoins in your virtual wallet, in a year’s time you will have only 95. This creates an incentive to spend them rather than hoard them.
This feature makes Freicoin quite different from gold, which unlike nearly any other metal or commodity does not decay with time. Indeed, gold-based currencies suffer many of the same problems that Bitcoin does, including hoarding, deflation, and concentration of wealth. Perhaps Bitcoin is too much like gold. One unintentional parallel is that Bitcoin (and Freicoin) is generated with great computational effort at a high cost to the environment, just as gold mining requires huge mechanical effort and is perhaps the most destructive form of mining on the planet. We don’t really need that gold: some two-thirds of all gold every produced is sitting in vaults. Another huge amount sits in jewelry boxes, worn on rare occasions or not at all. Yes, gold is useful for non-corroding electronics and other things, but at present only about 10% of gold production goes toward industrial uses. With great effort and pollution, we dig gold out of holes in the ground and bury it in other holes in the ground called vaults. Why would we want to model a currency on gold? In an age of climate change crisis, isn’t there a better use of electricity, computer power, and smart hackers than the computation of useless procedures, all to create digital currency that could be created much more easily by some other process?
The reasoning behind the computation-intensive “proof-of-work” process for creating Bitcoin, Freicoin, and others is that it keeps the currency scarce. The thinking goes, there must be some limit on the amount of money created or it inflates and ultimately becomes worthless. Because it is hard to create, the supply of money has a natural limit that politics cannot alter. Or can it? After all, a community of human beings decided on the generating process and upper limit on the number of bitcoins, and that community could also change its mind.
In gold mining, those who, through whatever accident of history or fate, control the gold mines have inordinate wealth and power, power that far exceeds their contribution to society. The same is true of the computational mining of digital currencies. While in theory anyone can do it, in practice it is only people with considerable technical know-how and the means to acquire computing power. Now, I admit that if anyone is to have disproportionate wealth and power, I’d rather have it go to computer hackers than to land barons and mining companies, but I ask, “Why should the money creation process have, at its very outset, disparity of access to wealth built into it?”
With these learnings from the Bitcoin experiment, I would like to propose a new model for digital currency. The question is how make the issuance of and access to money egalitarian on the one hand, yet also regulate the money supply in an organic, decentralized way.
First let us consider the issuance of money. The simplest way to make money creation egalitarian is to issue it in equal amounts to each citizen. To draw on the analogy of gold mining, that would be like sharing the total output of the mines equally among all citizens. There is indeed a strong argument to be made that Earth’s mineral wealth, its forests, oceans, and biosphere should be a commons, and that wealth distributed as a social dividend or universal basic income. By the same token, no privileged minority, whether of bankers or of computer specialists, should be able to enjoy exceptional benefits from their ability to create money: that function should be, perhaps, the “financial commons.”
A digital currency could simply be issued in equal quantity to each user. The technical difficulty is to ensure that each person can register only once – some kind of unique identifier is necessary. This is feasible for a government, more difficult for a private or peer-to-peer organization, especially when dealing with multinational users (U.S. users have unique social security numbers).
Alternatively or in addition, selected organizations could become “backers” of the currency by pledging to sell a certain quantity of goods or services for the currency at a certain price. In return, the issuer would create that quantity of money as a zero-interest loan to the backer. These loans would be a way to finance the development of deserving enterprises; perhaps they might be chosen via a democratic process among the user base. When the loans are repaid, that money disappears; what influences the total money supply is the ongoing level of new lending.
Finally, money could also be created by gift. Digital coins could be issued to volunteers, charities, open source software firms, ecological and social justice organizations, and other people and organizations deserving support. So much important, socially necessary work goes unrewarded today. Issuing an alternative currency via such groups could remove some of their financial hardship once the currency becomes well-established. The recipients of newly issued money could be crowd-selected by the existing user base or some other voting system.
Whether issued to all users or to selected people and organizations, once issued the digital money works just like Bitcoin or Freicoin. Anyone who has set up a digital wallet can use it. The next question is how to regulate the money supply over time.
Ideally, a money system should allow the supply of money to organically grow or shrink in relationship to the economy’s need for money. In our current system (in theory), central banks do this by buying or selling debt instruments, mostly government bonds, on the market, thereby creating or destroying base money. How do they decide how much to create or destroy? They (again, in theory) monitor economic activity, lending conditions, inflation, and so forth to determine whether tighter or easier access to money will serve society. The central bank is supposed to be first and foremost a listening organ that responds to a collective need for greater or lesser flow. As I argue in Sacred Economics, this function is similar to that of a heart.
In practice, of course, this principle is fraught with abuses, but the beauty of the principle suggests that a next-generation digital currency should have a more flexible, organic way of regulating money supply than the simple formulas used by existing digital currencies, which lay out in advance how much money will be created in a given time period. (Most set an absolute limit as well; in the case of Bitcoin, a decreasing amount will be mined every four years until a final limit is reached in 2040.)
How can we design a digital currency to be more like a self-regulating, homeostatic living organism? One way would be to use a more sophisticated kind of formula, one that contains among its parameters feedback from transaction metrics. For example, more new money could be issued as its value relative to goods and services rises, and less could be issued (or some removed) in the opposite, inflationary case. Or perhaps an even better parameter would be the velocity of money. If the number of transactions per “coin” per month falls, indicating deflation, more money could be created. If economic activity starts overheating, money could be removed.
I think, however, that any formula will bump up against real-world exigencies that will create a need to make exceptions and adjustments. This necessarily involves some kind of political process, which is exactly what the designers of Bitcoin hoped to avoid. They wanted money free of political interference, even of their own political interference. This freedom from politics is always an illusion, because money is ultimately an agreement among human beings. Even gold-money exists, in large part, by sociopolitical fiat: societies can shut down gold mines, confiscate gold, or declare something else legal tender. Similarly, Bitcoin could change its rules, increase its money supply, change the process by which new coins are created, and so on. Even the choice to change nothing is a political choice within the Bitcoin community. Politics is inescapable, and we pretend otherwise to our peril.
Granted, the necessary sociopolitical process of money creation and regulation need not be hierarchical or centralized. The dominant money system is, and at the top of the hierarchy are the established elites, themselves beholden to an increasingly desolate ideology of endless economic growth and to the relentless dynamics of debt-based capitalism that enforce it. New digital currencies offer an opportunity to explore new modes of organizational and political decision-making.
To sum up, a next-generation digital currency should have the following features:
It should be issued in an egalitarian way that doesn’t give undue advantage to any elite, whether political, technological, or financial.
It should of course be simple to use and secure. Anonymity is probably also necessary in the present milieu of an undemocratic surveillance state. In a more beautiful world, I think all wealth and transactions, especially those of government (whatever that looks like), should be completely transparent.
It should, like Freicoin, bear a demurrage charge to discourage hoarding and counteract the tendency toward concentration of wealth.
– The addition or removal of money from the system should respond to its need for money, through some kind of homeostatic negative-feedback formula or process based perhaps on price fluctuations or the velocity of money.
The whole thing should be embedded in a democratic, peer-to-peer political process by which the rules can be changed.
Such a system need not be created from scratch. One of the existing systems, perhaps Freicoin or even Bitcoin, might evolve in this direction. After all, Bitcoin describes itself as an experimental currency. The purpose of experimenting is to learn. The next step is to integrate that learning into a new and bolder experiment.

Notes on the nature of the revolution in the p2p/commons epoch

photo of Michel Bauwens

Michel Bauwens
20th July 2015

This is the draft version of the article submitted to the special issue of Spanda Journal on Systemic Change, which was edited by Helene Finidori and contains many excellent essays.
Michel Bauwens:
At the P2P Foundation, we don’t use the moniker ‘revolution’ with much frequency, preferring the concept of phase transition.
In this article, we would like to elucidate the relation between the two concepts.
In my experience, revolution is used in two quite different senses; in a generic sense, it just means a ‘big change’, like for example when we speak about the Industrial Revolution, this was a long and drawn out process, with many aspects and it would be really difficult to identify with one particular event. Yet at the same time, there is clearly a time when indutrial changes emerged in a mostly agrarian context, and a time when it is the industrial processes and forms of organisation which are dominant, and the agrarian aspects subsumed under that domination. Clearly, between these two moments, a ‘phase transition’ has occurred.
Revolution is also used in a much more narrow fashion, which usually refers to a momentous series of concrete events, in which the very organisation of power in society changed fundamentally, leading to a wholesale replacement of human personnel, a new different balance of power between social classes, and the like. Paradigmatic examples would be the French and Russian revolutions.
Both types of revolutions occur throughout history, but for many people, at least for those that live more comfortably, the second notion is less attractive. Indeed, it is most often associated with violence, often directed against the very ‘leaders’ of the first phases of such revolutions, and to boot, usually leads to counter-revolutions. The achievements of such revolutions, their victories, are often also very problematic. Who can unproblematically affirm that the Napoleonic and Soviet regimes for example, were necessarily ‘better’ than what they replaced; or, that these radical social and political events produces better outcomes than the slower processes which led to similar phase transitions ? An additional issue for the ‘narrower’ meaning of revolution is that for many people, even for those who dislike the presently dominating regime of their time, is that it is not very clear most of the time, what form the new post-revolutionary regime should take, especially if the negative aspects of other attempts are quite clear.
For this and other reasons, we prefer to talk at the P2P Foundation, about phase transition, stressing the process of change from one system to another, without necessarily being able to predict how exactly these changes will occur, especially on the political and social level. But let’s be clear, from the historical record, it is pretty clear that such fundamental changes are usually associated with rather deep social convulsions. For example, if we take the deep shift from the Roman system to the feudal system, it was characterised by military invasions from foreign tribes, which substantially changed the political leadership in post-Roman regimes. For centuries, Europe was unstable. If we take the changes associated with the Reformation for example, we see similar convulsions and religious civil wars; the change from the Ancien Regime to capitalism was similarly fraught with deep political and social crises. So there is no doubt that a similarly deep transition will be associated with social convulsions, wars, and yes, political and social revolutions. The question is, what kind of forms these will take, and not that we can guarantee a cozy transition.
However, just as the revolutions of feudalism differed fundamentally from the revolutions that created capitalist societies, so the transition to a commons society will take different forms.
In what follows, I explain my view of what those differences could be.
First, what do we mean more precisely, when we talk about a transition towards a post-capitalist, p2p-driven, commons-oriented society ?
Here are a few pointers.
In the present dominant form of society and economics, nature is considered to be an infinite resource and the market ‘externalises’ environmental concerns. It is based on ‘pseudo-abundance’. At the same time, the present system attempts to systematically render ‘artificially scarce’, what is naturally abundant, such as say agricultural processes, but more specifically, knowledge production. In p2p/commons processes, the natural abundance of the immaterial commons such as knowledge, software and design, and technical and scientific knowledge, is recognized and shared and made available to all humanity; and it is associated with changes in the mode of production, that insure that production regenerates resources, maintaining ecological and resource stability for coming generations and for the natural world and its beings, of which we are an integral part.
In the present form, corporate entities compete against each other, but within these entities, collaboration, though mostly hierarchically driven, occurs: cooperation is subsumed under competition; in the new form, ethical entrepreneurial coalitions co-create commons with contributory productive communities; and are interlinked around these commons through social charters and open licenses; though they may compete within that sphere of collaboration. In other words, competition is subsumed under collaboration. The value is created and deposited through commons, and the economy creates livelihoods around these commons and their contributory communities, and the market creates ‘added value’ services and products around these commons.
So what we see here in the nature of these changes are a series of qualitative reversals in terms of the operating logic of the system.
These phase transitions are inextricably linked to changes in the nature of economic, social and political power. How should we see that relationship ?
The process of past phase transitions has been the following:
1) the existing dominant system increasingly creates systemic crises that it no longer is able to solve
2) both managerial (ruling), and productive classes (the dominated producers of value for the managerial classes) , look for solutions; they do this in varied, fragmented, and pragmatic ways, under the dominance of the older structure; forming ‘patterns of response’ , or solutions. Gradually, these patterns find themselves, and though they are used by the dominant system, they also represent an alternative logic that is slowly building up and asserting itself. Within the old paradigm a new prefigurative paradigm emerges, which is subsumed under the old logic at first but gradually gains strength.
3) these changes in the modalities of production and value creation and diffusion also create new social structures; an ‘exodus’ occurs from the old system towards the new system; Roman slaveholders become feudal lords become merchants and industrial capitalists; slaves become serfs become labor. When the tensions between the new and the old are no longer absorbed by the old system, social and political convulsions occur, eventually leading to ‘revolutions’ in the organization of society
Today, we see this process clearly at work.
The systemic crisis of global neoliberal capitalism is leading to 3 types of patterned responses:
1) sustainable production which takes into account ecological limits
2) solidarity economy and cooperative forms of organisation which stress the need for social justice in terms of value distribution
3) commons oriented peer production and other forms of sharing and openness which operative against the enclosures, artificial scarcities and privatisation of common knowledge.
These patterns are still fragmented, only exceptionally ‘eco-systemic’ in their concrete practice, though these alternative eco-systems are definitely emerging and strengthening. What is specifically emerging is a new proto-mode of production in which contributory communities create common knowledge , in which enterpreneurial coalitions create added value on top of the commons in the still capitalist marketplace, and in which for-benefit associations create and maintain common infrastructures of cooperation and production.
What needs to happen, and is starting to happen is that these productive communities, rather than be subject to the logic of extractive value captation by ‘netarchical capitalists’ (those in the old system which are investing in the new systems for their own benefit); create their own ethical economic vehicles, which allow them to create livelihoods around their commons-creating activities. This represents the necessary convergence, through open cooperativism, of economic forms which respect social justice (the solidarity economy and other forms), with peer production; and on the other hand the equally necessary convergence with sustainability, through for example the ‘open source circular economy’.
A important issue today is the relation between the ‘prefigurative’ forms, i.e. individuals and communities finding alternative systems of value creation that respond and solve the present systemic crisis, with political and social change. The crisis today expresses itself because the traditional emancipatory forces of the industrial society (left parties, unions and the like), are still oriented towards the old paradigm of capital and labor; while the many productive communities have a strong distrust of these older political forms, and new forms are still weak and emergent.
Nevertheless, we see this necessary convergence is also already happening:
1) new political forms are emerging from the new digitally networked production practices, such as the Pirate Parties and others
2) huge social mobilisations have taken place, using the models of peer production in their creation of politics, which has substantially influenced the new political movements that have also grown from this, like Syriza in Greece, and Podemos in Spain. Emblematic may be the city coalition in Barcelona, En Comu, which won the elections, and which is the first political coalition to specifically refer to the common in its new political ideology. Other perhaps even more radical forms are the civic coalitions that have emerged in France, (Saillant), and the UK (Frome), in which allied civic groups directly replace the existing ‘political machines’.
These more political movements have emerged from what were originally anti-political mobilisations but have learned through experience that prefigurative actions and protests cannot produce substantial victories in the context of a hostile state; and that therefore, the state itself has to be tackled and transformed. What is most likely in this evolution is the transformation of the electoral democracies, in which elections have now themselves become enclosures of political power of the people by a professional political class that is operating in a market state form that is dominated by private financial interests that have made real and gradual change impossible. New hybrid forms will combine elections, with associated forms of deliberative and participative democracy, but the political initiative more directly in the hands of the citizenry, and use the ‘partner state’ model, in which a transformed state will create the necessary civic and technical infrastructures to ‘enable and empower individual and collective autonomy'; on the political agenda is the development of public-commons partnerships and the communification of public services, such as for example the example of the Bologna Regulation for the Care of the Urban Commons.
My personal belief is that given the exodus from labor forms of work to those of networked and commons-creating peer producers of the new precarious working class, that a reconstruction of social and political institutions is necessary, based no longer of the declining form of the salariat (which is itself a legal form of subordination), but on the ‘commons’. I have elsewhere proposed to create at the local level, Assemblies of the Commons for civic actors and Chambers of the Commons for the new economic actors, to reconstitute institutions of ‘commonfare’ that can recreate a powerful social force that will in turn reconfigure politics to create powerful ‘coalitions for the common(s)’, such as En Comu in Barcelona. The Barcelona victory was indeed preceded by precisely such a civic reconstruction by the post-15M activists, which created new participatory forms in the social movements and commons-creating productive communities.
Another important issue to be resolved in this specific phase transition is the relation between the local and the global. The big wave of relocalisation taking place today, through for example the groups reconfiguring the provision of food and energy, is paradoxically itself facilitated by the globally networked technology that is the internet. But most of the time, these local communities using global technology to strengthen local activity, and not necessarily to project global power.
Today we have global formal civic associations, and through p2p, global open design communities, what is missing is global ethical entepreneurial forms that can operate on a global scale and can form a counterpower to private and extractive multinational corporations. The immediate limitations imposed on the Greek Syriza party also shows the very strong limitations for local and national politics in terms of structural change. Local and national movements are necessary, but not sufficient, and a orientation towards the global commons, through physical global institutions, will be vital, as is their political expression. Lasindias.net has proposed, and we support this vision, the creation of ‘phyles’, global business eco-systems that sustain the commons and their communities, and the FairCoop project is a first attempt at developing this.
Revolutions in the narrow sense, are organic and often destructive events, not in the control of any particular social force, we can notice the tinder, but we can’t know which spark will alight it. It would be unwise to rejoice especially if the alternative social forces and productive systems are still emerging.
Big waves of social revolution has been unsuccessful, like for example the wave of 1848 in Europe, or the wave of 1968; and as for the successes, “be careful what you wish for”.
Therefore today, what matters is the reconstruction of prefigurative value-creating production systems first, to make peer production a autonomous and full mode of production which can sustain itself and its contributors; and the reconstruction of social and political power which is associated and informed by this new social configuration. The organic events will unfold with or without these forces, ready or not, but if we’re not ready, the human cost might be very steep.
Therefore the motto should be: contribute to the phase transition first; and be ready for the coming sparks and organic events that will require the mobilization of all.


Toward Regenerative Society: Plan for Rapid Transition


Blogger Ref http://www.p2pfoundation.net/Transfinancial_Economics
Toward Regenerative Society: Plan for Rapid Transition
The Commons Transition/P2P Foundation team was pleasantly surprised while reading the Center for Planetary Culture‘s Plan for Rapid Transition, authored by Daniel Pinchbeck. It is a thorough and inspiring overview for transitioning to a more sensible cognitive framework that holds many similarities to our own Commons Transition Plan, including its focus on an integrative global phase transition. To achieve a truly inclusive transition, it’s essential to offer an ecology of proposals utilizing different metaphors and appealing to different cultures. We want to celebrate this diversity within affinity by including the Plan for Rapid Transition as part of our in-depth Special Reports series. Furthermore, after consulting with the CPC, we’ve decided to add the Center for Planetary Culture as a Commons Transition Partner Project in the near future, and to work together to explore and communicate these ideas and experiences worldwide.
For easy reference, we’ve indexed the report by section. You can read it sequentially or jump to the any of the sections below.
Alternatively, you may download the report in PDF here.


Today, humanity faces our greatest challenge, and our most precious opportunity.  Our activity as a species has put the Earth in jeopardy. We can directly observe that our use of resources must change.  We are threatening the ability of the biosphere to support our continuity, and the future of all complex forms of life.
We appear to have reached one of those rare, extraordinary junctures in human history when a thorough transformation of society, culture, and consciousness is necessary. Climate change is the most urgent of many impending threats. As individuals, we must understand and accept the critical nature of our time. For the sake of future generations, we can become part of a wave of awakening and of action, that grows exponentially.
Under this extreme time pressure, there is great potential to quickly develop and distribute a new social model based on an ethos of global citizenship and planetary stewardship.
For this to happen, humanity must act upon our unique capacities for self-awareness and foresight. We have an opportunity to fully activate the prefrontal cortex – the brain structure that makes us uniquely human, which developed in the last forty thousand years. We must collectively work to envision a new model for planetary civilization, then design and manifest it.
This position paper outlines elements of a regenerative culture, and a path to attaining it. It is based on ongoing research compiled by Center for Planetary Culture. Over the next months, we expect to make further iterations of it, based on your comments. We will also commission other papers in specific areas of research, such as water management, collaborative decision-making, traditional religious structures as vehicles for social transformation, and cooperative economic models. If you would like to get involved in our efforts, please contact us and collaborate to our work.
Figure 1 – Towards a Regenerative Society
Figure 1 – Towards a Regenerative Society


To build a regenerative society based on resilience and plenitude, we require a strategic and tactical plan of action to transform our social system and culture. We can facilitate this shift in values by generating new, inspiring narratives that foster the necessary paradigmatic shift. Any plan for a rapid transition to a regenerative society must address the following three key areas: technical infrastructure, social structure, and cultural superstructure.
Figure 2 – Key areas of a Regenerative Society
Figure 2 – Key areas of a Regenerative Society


FactboxThe ecological crisis is not just a symptom or a byproduct of industrial society. It reflects a deep predicament – a crisis of civilization. Due to the rapid evolution of modern culture, we have found ourselves unable to make basic changes in our daily lives and habits that are necessary to bring human activity into alignment with the Earth’s support systems. Our current state requires a global people’s movement comprising self-educated, passionate citizens working together to reinvent our society, on all levels.
We currently possess all the necessary technological solutions and sources of renewable energy to power an ecologically and socially just society. Yet the world’s governments and business sector have shown they are unable to address our planetary emergency.  The intrinsic logic of our political-economic system requires constant growth and over-consumption.
According to estimates, energy corporations spend $900 million a year on think tanks to influence public policy. Billions more are spent on lobbying and advertising. This expenditure supports our continued dependence on fossil fuels, and the belief that we lack a viable alternative.
Accelerated climate change, species extinction, and ocean acidification endanger our collective future. While everyone on Earth will be impacted eventually, poor people in the Global South suffer first from the effects of environmental degradation. Around the world, indigenous people have been the first line of defense against the extractive industries, which threaten traditional ways of life.
The modern financial system continues to concentrate wealth in fewer and fewer hands. In our world today, two billion people earn under two dollars per day, while less than 1% of the population control more than 50% of global wealth. 85 individuals possess more wealth than half the human population – 3.5 billion people. This vast inequality of wealth contributes directly to social injustice and ecological decimation. For humanity to survive and prosper, we must distribute resources, knowledge, and technical solutions far more equitably. This requires a fundamental change in socio-economic paradigm – and a new worldview.


Our industrial system was built to support “conspicuous consumption” and “planned obsolescence”. It is accompanied by a debt-based economic system that requires constant growth to maintain itself. Publicly-traded corporations must maximize profit to satisfy shareholder value. This is their prime directive. To obey the logic of the stock market, they must generate waste and externalize environmental costs.
Today, many corporations advocate sustainability and corporate responsibility. They promote new initiatives to recycle and conserve resources, among other environmental practices. Unfortunately, the logic of the current economic system forces them to prioritize profit-making. Therefore, corporate initiatives toward sustainability fall woefully short of creating long-term resilience. We require a fundamental redesign of our economic system to value ecological practices and strengthen the commons.
The changes that need to be made to our technical infrastructure, on a global scale, are clear. We need to unite the world’s population behind a project for rapid transition to regenerative practices. In this paper, we will explore how to apply this logic in three areas: energy, agriculture, and urban design. Within a few decades, planetary civilization could run on 100% clean energy, grow food through organic or ecological agriculture that restores carbon to the soil, and transition to eco-city design principles, enhancing local resilience, ethical values, and decentralized power.
Some general action items would include:
• Implement distributed models for agricultural, industrial, and energy production based on resilience;
• Derive power from renewable energy sources;
• Remove subsidies and factor in externalities, such as CO2 pollution;
• Make consumer products that are durable, with replaceable components;
• Transition to “cradle-to-cradle” manufacturing, powered by renewables, where all byproducts of manufacturing feed productively into the ecosystem.

Figure 4 – Cradle to Cradle Manufacturing
Figure 4 – Cradle to Cradle Manufacturing

Figure 5 – Changes in our Technical Infrastructure
Figure 5 – Changes in our Technical Infrastructure
The following three sections outline a strategic approach to change in the technical infrastructure.


A number of recent studies on renewable energy help to define and clarify the path to a global transition.
Stanford engineering professor Mark Jacobson proposed that worldwide energy production could become almost entirely renewable by 2030. According to Jacobson and his coauthors in 2009, “The obstacles are primarily political, not technical.” Jacobson has launched The Solutions Project, with a plan for every state in the United States to completely transition to renewable energy within a few decades.
Figure 6 – Study by the Stanford University
Figure 6 – Study by the Stanford University
Source: Stanford University, Energy Policy, 2013.
Developed under the leadership of Columbia University economist Jeffrey Sachs, Pathways to Deep Decarbonization offers the outline for a worldwide plan to shift to renewable energy. The plan has three basic aspects: Increasing energy efficiency and conservation, rapidly developing low-carbon sources of electricity, and fuel switching: “Switching end-use energy supplies from highly carbon-intensive fossil fuels in transportation, buildings, and industry to lower carbon fuels including low-carbon electricity, other low-carbon energy carriers synthesized from electricity generation of sustainable biomass, or lower-carbon fossil fuels.”
In The Third Industrial Revolution, economic and social theorist Jeremy Rifkin promotes an optimistic alternative. The revolution is based on: (1) shifting to renewable energy; (2) transforming the building stock of every continent into green micro–power plants to collect renewable energies on-site; (3) deploying hydrogen and other storage technologies in every building and throughout the infrastructure to store intermittent energies; (4) using Internet technology to transform the power grid of every continent into an energy internet that acts just like the Internet (when millions of buildings are generating a small amount of renewable energy locally, on-site, they can sell surplus green electricity back to the grid and share it with their continental neighbours); and (5) transitioning the transport fleet to electric plug-in and fuel cell vehicles that can buy and sell green electricity on a smart, continental, interactive power grid.
Figure 7 – Internet of Energy
Source: BDI Initiative, Internet of Energy, 2010.
Action Items:


Relocalized organic agriculture is, in itself, a powerful adaptation strategy for climate change. A large scale transition to ecological and organic agriculture would sequester carbon already present in the atmosphere, and reduce future CO2 emissions substantially. A significant reduction of meat consumption, globally, is necessary to reduce CO2 pollution. Global training in organic agriculture and permaculture techniques, mass volunteer initiatives to create urban gardens and local farms, and promotion of vegetarian diets could help accelerate the transition to a resilient and regenerative food system.
The organic techniques that allow for the sequestration of carbon include integrated pest management using non-synthetics, crop rotation, cover crops, and increased soil microbial activity that allows agricultural fields to become carbon “sinks”. Biochar, a charcoal soil additive produced by burning biomass in an oxygen weak environment, can be infused into soil to sequester additional carbon. According to journalist Mark Herstgaard, “If biochar were added to 10 percent of global cropland… it would store 20 billion tons of CO2 equivalent—roughly equal to humanity’s annual greenhouse gas emissions.”
Permaculture and agroforestry farming practices offer the most integrated, resilient, functional, and spiritually rewarding forms of agriculture. Permaculture, a term coined by Bill Mollison and David Holgren in the late 70s, stands for “permanent agriculture.” Its success lies in proper design and integration with the landscape, from landforms to water sources. Permaculture’s “ratio of output to input is about 5 times as good as that achieved by the benchmark US farm.”
Figure 8 – Soil Carbon versus Biochar Source: Biochar International, Climate Change and Carbon Sequestration, 2014.
Figure 8 – Soil Carbon versus BiocharSource: Biochar International, Climate Change and Carbon Sequestration, 2014.
Today, agricultural produce often travels thousands of miles to market. While local food movements have been burgeoning, community and urban gardens can be established everywhere. Vacant lots, suitable rooftops, parks, and greenways can be transformed into community gardens, food forests, and medicinal plant habitats. It has been estimated that 80% of the food needed by New York City could be grown on urban rooftops, using aquaponics. Vertical farms in urban areas could also provide low-carbon solutions.
Designing agricultural systems that are decentralized and specialized will help maintain ecological and genetic diversity. Smaller plots can be structured into larger farming co-operatives, where social support, hardware, and labor can be shared and supplemented across farms where necessary.
Figure 9 – Urban Farms  Source: GE Reports, Lettuce See the Future, 2014.
Figure 9 – Urban FarmsSource: GE Reports, Lettuce See the Future, 2014.
Action Items:


Reinventing cities for a post-growth world could lead to tremendous savings on greenhouse gas emissions, while radically improving the average quality of life. The most sensible model combines the concept of “eco-city design” with the model of “shareable cities,” where communities make collective use of tools and resources.
Inevitably, we must make a transition from a social paradigm based on incessant growth and increasing the Gross Domestic Product (GDP), to one based on qualitative aspects of being and experiencing, prioritizing community values and cultural expression. New and redesigned urban centers will no longer maximize opportunities for businesses and corporations, but facilitate the highest quality of life for all residents. Cities will become what Richard Register calls “scaffoldings for living systems,” as well as “learning machines,” designed to support residents in attaining knowledge and expertise in all fields of human endeavor.
Figure 10 – Eco-city
Figure 10 – Eco-city
Source: Eco-City Builders, Progress at Tianjin Eco-city and Promise at Nanjing, 2012.
As sea levels rise over the next decades, many urban areas will need to be redesigned and relocated. New city centers will be built inland, at higher elevations. In theory, these new constructions could be builtentirely on ecological principles, with food, renewable energy, and manufacturing all accomplished on site. As part of this change, we could see a managed transition from privatized to cooperative ownership of businesses and residences, as well as participatory management based on the model of Porto Alegre in Brazil.
Action Items:


Rapid transition to a regenerative society requires a reboot of our political and economic system to support ecological restoration and the health of the collective. We can think of this process similar to the design and installation of a new operating system for human society. Technically, we have the ability to experiment, iterate, and reinvent our political and economic system. Currently, the inertia of our present social, political, and financial order blocks our ability to envision and enact this metamorphosis.
History reveals the evolution of media and the development of political-economic systems to be a single, unified process. Empires like Rome were only conceivable once a written code of laws could be disseminated. The modern printing press enabled mass democratic societies, as the populace needed to be able to follow current events. The nation-state government – republics based on representation – developed in the late 18th Century, when horse-and-buggies and schooner ships were the cutting-edge technologies of communication.
The problem is that today’s systems of governance are no longer well-suited to the speed and complexity of our highly interdependent world. They are highly inefficient, opaque, and secretive by design; subject to the undue influence of wealthy individuals, corporate lobbies, and special interest groups. We confront the rapid development of new technologies that have the potential to impact all life on Earth – such as synthetic biology or artificial intelligence – which fall outside of the capacity of governments to regulate. We find ourselves fighting archaic conflicts when all of our efforts must be focused on restoring the ecological support systems that allow life to continue.
thumbProxy (3)Politics and economics are ultimately inseparable. Today’s governments, financial elites, military, and corporate interests are melded together in what some commentators call the military-industrial complex. The most powerful players in the private sector are the oil and gas companies. In 2012, Exxon Mobil reported nearly $45 billion in profits, the largest annual amount for any company in history.
Today’s information technologies could facilitate a rapid evolution of society, enhancing collective intelligence. A liberation of the knowledge commons could accelerate progress in many areas of inquiry, leading to a second renaissance. A global citizen’s movement of nonviolence and pacification, following the satyagraha principles defined by Gandhi, could lead to a rapid transition to a peaceful world.
The recent evolution of a fully interactive communications media that spans the world instantly should lead, we believe, to a transformation in our global political-economic system. New social tools can facilitate the rise of direct, participatory democracy on a global scale, with the people able to continuously educate themselves, debate, and decide.
We believe the global community needs a new social contract. Recent efforts to draft such a contract include the Earth Charter, “a declaration of fundamental ethical principles for building a just, sustainable, and peaceful global society in the 21st century. It seeks to inspire in all people a new sense of global interdependence and shared responsibility for the well-being of the whole human family, the greater community of life, and future generations.”
Figure 11 – Elements of a Post Growth System
Similarly, in 2011, Occupy Wall Street declared “principles of solidarity,” “points of unity,” that include:
  • Engaging in direct and transparent participatory democracy;
  • Exercising personal and collective responsibility;
  • Recognizing individuals’ inherent privilege and the influence it has on all interactions;
  • Empowering one another against all forms of oppression;
  • Redefining how labor is valued;
  • The sanctity of individual privacy;
  • The belief that education is a human right; and
  • Making technologies, knowledge, and culture open to all to freely access, create, modify, and distribute.
We propose that every human being on Earth should be guaranteed a basic subsidy – secure access to food, shelter, education, and health services. Access to knowledge – humanity’s intellectual and creative commons – must be liberated, as a human right. This requires a change of economic and political paradigm, as well as an equitable distribution of resources.
We must make a rapid shift from a debt-based financial system that forces constant growth to a regenerative economy, based on cooperation, sharing of resources, peer-to-peer production, where value is linked to the health of communities and the restoration of ecosystems. In the immediate future, citizens must pressure governments to institute a carbon tax and other economic policies that penalize corporations for emissions. The current student movement to get universities to disinvest from fossil fuel companies should grow rapidly, and become a universal initiative.

An alternative economic system could be an ecosystem of tools for particular purposes, rather than a monoculture where value is controlled by a single monopoly or cartel. It would include a number of instruments for exchanging value that support different behavior patterns and beliefs. Our current economic system, based on debt, restricts experimentation and innovation and leads to concentration of wealth. The money supply is controlled by Central Banks, forcing artificial scarcity and competition.
New currencies – ranging from local to global instruments – could support equitable development and cooperative social models, as part of a regenerative social design.
Today’s financial system is overtly dysfunctional, lavishly rewarding the few at the expense of the many. The Federal Reserve creates billions of dollars each month to buy mortgage-backed securities and US Treasury bonds, rather than supporting the poor. Soon, we may reach a tipping point where innovations in currency go mainstream. The realization that money is actually a design problem could have far-reaching implications for human civilization.
For the first time, with the Internet, humanity possesses a globally interactive medium for enhancing knowledge, for building consensus, for creating new forms of value exchange, for supporting collective action on every scale. Theoretically, new social technologies could augment or supersede the current political economic system in a short period of time. Such a transition may happen rapidly and peacefully.
Existing Currency Proposals:
Figure 12 – Existing Currency Proposals
Figure 12 – Existing Currency Proposals

Figure 13 – Changes in our Political-Economic System
Figure 13 – Changes in our Political-Economic System


“The only thing that one really knows about human nature is that it changes,” Oscar Wilde wrote. “Change is the one quality we can predicate of it. The systems that fail are those that rely on the permanency of human nature, and not on its growth and development.”
To bring about the necessary advances in technical infrastructure and political-economic system, humanity must make a great leap. According to scientific projections, if we continue our current level of CO2 emissions for the next fifteen years, we will have locked in a 2 degrees Celsius temperature rise. This would be catastrophic, perhaps irreparable.
We have only a brief window of opportunity to make a global transition to renewable energy while undertaking large-scale initiatives to reduce CO2, by planting new forests and urban gardens, and so on. We must undertake this transition at a time when natural resources are increasingly scarce, and economic inequality has reached new levels. Humanity has never been in this situation before, and we must admit that nobody has a solution for how change of the necessary speed and magnitude can, in reality, take place.
Rather than passive consumers governed by distant authorities, our critical situation on the Earth now requires highly motivated, inspired, self-directed agents willing to take action for the good of the collective. Communities must organize themselves to conserve energy and build new infrastructure, while stopping the eco-cidal practices of corporations, particularly the extractive industries.
To bring about these fundamental changes in our worldview, technical infrastructure, and political-economic structure, we require:
1. Community organizing / direct action
A global citizen’s movement must interrupt “business as usual.” We must spread awareness of the need for immediate change, along with the tools to manifest it. As individuals, we can choose to take part in local organizing, in acts of creative resistance and in efforts to build a new political infrastructure for our shared human future.
Models like Transition Town, Occupy, 350.org, theRules.org, the Evolver Network, and MoveOn provide templates for activism and community organization. A global network of local communities and nonprofit organizations can work together to demand policy changes and directly implement alternatives – such as local currencies, urban gardening, the shift to renewable energy sources supported by micro-grids, and the transition to electric vehicles. A mass citizen’s movement must arise to pressure corporations and compel governments to change direction.
2. New media / social technologies
We need to develop a virtual infrastructure that supports the paradigm shift. This would include:
•  Alternative media
Media shapes public opinion, collective awareness, and social practices. If we are going to meet today’s challenges, we need media that provides accurate, well-prioritized information. A conscious, solution-based media could support a rapid change of paradigm, providing tools for participatory democracy and mass volunteerism. On a global level, we need to educate and train people in the skills needed to build a regenerative society. These skills range from permaculture to consensus decision-making, from energy conservation to solar installation, from meditation to ecosystems management.
The movement must make strategic use of all forms of media to impact public awareness, proposing alternatives that people can apply in their own lives. Public artists  have a great opportunity to participate in this transition. Those with cultural influence can use social media to reach their audience directly. By using models and techniques such as Spiral Dynamics, Neuro-linguistic Programming, and social psychology, we can devise strategic campaigns to awaken and inspire the multitude. We must convey a coherent understanding of our current situation, so people can take meaningful action, collectively.
The website Great Transition Stories proposes: “It is vital that the human community come together and consciously co-create visions and stories of a sustainable and thriving relationship with the Earth and one another.” Artists and media makers have a responsibility to construct those new narratives and myths that support humanity in making this giant step forward.
• Alternative networks for collaboration and cooperation
Companies like Google, Facebook, and Twitter have built networks that reach a large segment of the global audience. We have reached the age of the billion-person platform. A next generation of social networks could protect user privacy while providing tools for collaborative social action and consensus-building. These networks should be built on open-source, peer-to-peer principles. It is also conceivable that companies like Facebook and Google could provide social infrastructure for rapid transition.
•  New instruments for exchanging value / alternative economic models
The global banking system is a kind of social network, overseeing virtual data-streams. A kind of planetary nervous system that supports the exchange and amassing of value, the current economic infrastructure, unfortunately, is working against the immediate needs of our planetary community. The business-as-usual, growth-at-all-cost paradigm can no longer be maintained. As it centralizes wealth and privatizes the commons, the financial system threatens our collective future. Potentially, alternative networks for exchanging value could drive different forms of behavior and social ideals.
• Platforms for collective decision-making that support decentralized, distributed democracy
Many theorists believe we need to transition from political systems of control based on hierarchy – top-down authority structures, found in the military and corporations – to “heterarchy,” or “responsible autonomy,” where all stakeholders are involved in decision-making processes. While these truly democratic systems must evolve in living practice, through local gatherings and council meetings, they can also be modeled and supported by web-based technologies. Distributed decision-making platforms could, eventually, allow for worldwide councils where information and ideas are freely shared, with the best solution arrived at via consensus-based processes. Initial efforts toward constructing such systems include Loomio and DemocracyOS.
Figure 14 – Requisites of a Regenerative Society

Figure 15 – Changes in our Consciousness and Culture
Figure 15 – Changes in our Consciousness and Culture


We have only a short period of time available to bring about an epochal shift of human consciousness and civilization. If we continue business as usual, we will doom our children to a desperate world that may soon be uninhabitable. In the short term, as glaciers melt and sea levels rise, we will consign hundreds of millions, if not billions, of people in the Global South to miserable fates.
Beyond that, as Thom Hartmann writes, we have discovered that accelerated global warming is a “formula for extinction.” In past extinction events, “Something happens to increase global temperatures five to six degrees, which triggers a melting of the frozen carbon and methane oceanic reserves that then leads to further global warming devastating life on Earth.”
If we care about the future of human existence, as well as the continuity of life on Earth, we have a moral obligation – individually and collectively – to transform our culture rapidly, and institute a regenerative society.
Along with our ability to confront climate change and other aspects of the ecological crisis, we possess the technical capacities to liberate humanity, in the future, from unnecessary drudgery and brute labor. As we reckon with the ecological crisis we have unleashed, we will construct a post-work civilization, based on self-cultivation and collective responsibility, that is greater than anything we have known before.
While it threatens us, the ecological mega-crisis also provides a unique opportunity to bring about the evolution of global civilization. If we utilize the power of social innovation and apply our technical abilities for collective benefit, we can establish a truly free society, based on justice and righteousness, sharing and cooperation, direct democracy and world peace – a world where all take care of all.



- See more at: http://commonstransition.org/toward-regenerative-society-plan-for-rapid-transition#sthash.d0IUPc76.dpuf

A Possible Solution for the Greek Debt Crisis?

Ref Wikipedia/ Article by Robert Searle

What follows is a brief summary on how the Greek Debt Crisis could be resolved. It is presented as simply as possible, and takes a "moment" to read. Ofcourse, it may not be a brand new idea, but all the same it might still be worth considering. It could at the end of the day  help Greece, and the European Union (EU) to "save face".

The Dual Monetary Plan (DMP) consists of two parts (ie Dual). However, it does not involve a non-state parallel currency per se.

I) The Creation  of Non-Repayable Euros (Direct EURO QE)

Essentially, this is a temporary form of  mainly Direct Quantitative Easing(QE) in which new money is created electronically notably in a limited amount. Simply put,  it is new unearned non-repayable money (as EUROs)  which if produced in sufficient quantity could help the Greeks improve their economy, and pay off  their debts. This unconventional financing could over time be increased depending on the economic growth of Greece, and later phased out altogether when a high level of prosperity is achieved. If serious inflationary pressures appear then taxation, and possibly interest rate rises could be used to reduce the money supply in the Economy.

II) The Continued Creation of Repayable Loans in Euros

As part of the debt conditionality with European Union, the Greeks would still receive repayable loans, but the amounts which require repayment should be easier to pay off with the mainly Direct EURO QE into society, and the economy.

The idea of mainly Direct Quantitative Easing is nothing new. The Green Party suggested such a notion for helping  to create environmental jobs in the UK economy, and elsewhere. However, it is hard to see how Germany would accept such a concept as it is largely  trapped by old thinking  about financing, and banking. But if the DMP were introduced, and if it actually worked it could preserve the EURO in Greece, and keep the country in the EU.

However, The other scenario which may well happen in the future is the introduction of the Drachma,and hence, exit from the EU. Ofcourse, the introduction of any currency in a country requires something akin to Direct QE in which sufficient amounts of non-repayable money could be created for the economy. All countries had to do this in their history. The trick is producing "enough" money to prevent serious inflation, and such estimations are notably based on GDP, and on relevant Inflation Indicators. But the whole thing is not impossible ofcourse, and as mentioned before taxation can act as  a means of taming potential inflation along with interest rate rises, if necessary.

III) Electronic Re-Creation of Non-Paid Loans?

Using Emergency Measures, and certain changes in the Law,  the EU, and possibly the International Monetary Fund could have unpaid "unrepayable" loans re-created electronically, rather than simply "written off", or deleted from their computer databases.  Again, this is unlikely to happen, and can be viewed as a form of Debt Forgiveness. But with the DMP though  it could be possible over many years for the Greeks to repay their Debts possibly "in full" if the Direct EURO QE is used properly along with genuine economic, and political reform.


In spite of what the author has said in the above, he personally feels that ultimately a Greek Exit from the Euro, and indeed, the European Union would probably be the best solution in the long run.

Ofcourse, Greece is in no way ready to develop something like Transfinancial Economics. See http://www.p2pfoundation.net/Transfinancial_Economics

Monday, 20 July 2015

A Finnish parallel currency is imaginable

Officials quietly mull the logistics of leaving the euro

In the past couple of years, as the eurozone woes have unfolded, international investors have been transfixed by one small country on the edge of the region: Greece.
They would do well to keep watching another tiddler: Finland. For while Finland has not created much drama, precisely because it is one of the strongest eurozone members, some fascinating discussions are under way. Most notably, as the eurozone crisis rumbles on, some Finnish business and government officials are quietly mulling the logistics of leaving the currency union.
Take a look, for example, at a recent research paper from Nordea, the Nordic bank. This paper looks at the question of what might happen if Finland ever decided to run a so-called “parallel currency” system. The idea behind this, as Nordea explains, is that at times of stress it can sometimes seem beneficial for countries to maintain more than one currency unit. Most notably, if a country is trying to leave one currency, keeping that as legal tender alongside a second currency for a period can ensure a country honours its old contracts – and thus avoids a technical default.
In the case of Greece, for example, the idea of maintaining the euro as legal tender alongside the drachma has been floated by some economists as one technique for leaving the euro, without formal default.
This concept has been used in the past, in places such as the Weimar Republic (in 1923), the Soviet Union (when it broke up in the early 1990s), and more recently, in some emerging market regions.
But for Finland the concept is different. If a country such as Greece was to adopt its own currency alongside the euro, it would act from a position of weakness and probably need to force its citizens to hold drachma.
However, says Nordea: “Finland’s exit of its own accord would differ from a Greek exit, because a balanced national economy may, theoretically speaking, have two currencies even for a long transition period, and peg the new markka to the euro at a rate of 1:1 during the transition period.”
Most notably, under that scenario – of strength – the Finnish central bank could effectively let consumers and customers choose which currency they preferred to use. “Euros will not automatically be converted into markka; all deposits, debt and agreements will remain in euros until the depositors transfer their deposits to markka-denominated accounts and the parties to the agreements amend their contracts,” Nordea writes.
It adds that, “during the transition period, the Bank of Finland will offer to exchange euros and markkas at a rate of 1:1 both ways”. Only later would the markka float against the euro; and the latter could theoretically remain legal tender.
Whether Finns would “choose” to convert their euros, in this theoretical scenario, would depend on where they think that markka is heading. Right now, most investors would expect it to jump. After all, during the past year Finland has been viewed as a haven. If that continued, it might “lead to a mass movement of investors, which will strengthen the currency more than warranted by the situation of the real economy”.
But it is possible to imagine an alternative scenario. Prior to the past decade, Finland experienced periods of financial instability, and the tiny size of any new markka-denominated market might also prompt capital flight.
“A significant proportion of the money invested in Finland during the euro era comes from investors who have been looking for safe euro-denominated investments and are not willing to carry the exchange rate risk associated with a small fringe currency,” Nordea notes. “If foreign investors leave ... the liquidity of Finnish markka-denominated listed equity and bond markets will decrease, risk premiums will increase and high fluctuations in prices will become more frequent.”
And nobody could count on the European Central Bank to smooth over any wild volatility; after all, one of the central problems with any parallel currency regime is that it is unclear who (if anybody) is supposed to be in charge, or will take responsibility for losses. Little surprise, then, that parallel currencies have rarely worked well for long, or not without draconian capital controls.
Now, as noted above, discussions such as this by Nordea are still hypothetical. After all, as one of Finland’s leading investors recently told New York financiers: “The business community and politicians are very scared of leaving the euro ... we are unlikely to do it.”
But it is worth remembering that most Finns abhor those ECB bailouts; having embraced creative destruction in their own history, they now loathe moral hazard with a puritan zeal. And the longer the eurozone crisis rumbles on, the easier it becomes to imagine the once-unimaginable.
Perhaps it is time for ECB president Mario Draghi to visit Helsinki; if nothing else, Nordea’s report is a timely reminder that it is not just Greece and Spain that now have the capacity to surprise.

The economics of parallel currencies

The idea of introducing a parallel currency in Greece has made a comeback as the country faces a severe shortage of euros

(Unfortunately, Transfinancial Economics would at the present time be too advanced for a country like Greece in its Debt Crisis. But the ref is given here as it is the key project of the Blogger. See http://www.p2pfoundation.net/Transfinancial_Economics )

By Jérémie Cohen-Setton on 2nd June 2015 /Improving
economic policy  

What’s at stake: As Greece faces a severe shortage of euros, the idea of introducing a parallel currency used for some domestic transactions – while keeping the euro in place for existing bank deposits and for foreign transactions – has made a comeback.  Although historical examples of parallel currencies exist, the analysis of the idea remains in its infancy. It remains unclear whether and how one could find the right mechanics.
Biagio Bossone and Marco Cattaneo write that according to several recent media reports, both the Greek government and the ECB are taking into consideration the possibility (for Greece) to issue a parallel domestic currency to pay for government expenditures, including civil servant salaries, pensions, etc. This could happen in the coming weeks as Greece faces a severe shortage of euros. A new domestic currency would help make payments to public employees and pensioners while freeing up the euros needed to pay out creditors.
Ludwig Schuster writes that at the present time, we are talking about around thirty recent proposals calling for a parallel currency in the eurozone, and these have been coming from very different backgrounds. While specific proposals have been mentioned now and again in the media, the response has been barely discernible.
Ludwig Schuster writes that the idea of parallel currencies was discussed before the creation of the euro. It was, for example, proposed to first introduce the euro complementary to the national currencies, to soften the transition to complete integration. As we now know, the political decision-makers went down a different path. Similarly, following reunification, the German Federal Government decided to take the Ostmark out of circulation after introducing the Deutschmark instead of keeping it as a secondary currency during a transition phase (the then Minister of Finance, Oskar Lafontaine, was unable to gain support for this idea).

The basics of parallel currencies

John Cochrane writes that in modern financial markets, a country doesn't even need the right to print money in order to, well, print money! Bonds are money these days. Greece can print up small-denomination zero-coupon bearer bonds, essentially IOUs. Gavyn Davies writes these IOUs would not formally be given the status of legal tender, since this is explicitly against the terms of the treaties. Yanis Varousfakis writes that the great advantage of such schemes is that it creates a source of liquidity for the governments that is outside the bond markets, does not involve the banks and lies outside any of the restrictions imposed by European institutions.
Biagio Bossone and Marco Cattaneo write that the introduction of a Greek parallel currency could take place in at least two ways. The first avenue would be for Greece to issue IOUs, i.e., promises to pay to the bearer euros upon a future time expiration. Basically, these IOUs would be euro denominated debt obligations issued and used to replace euros to pay salaries, pensions, etc. The second avenue would be to issue Tax Credit Certificates (TCC) and assign them to workers and enterprises at no charge. TCC would entitle the bearer to a tax reduction of an equivalent amount maturing in, say, two years after issuance. Such entitlements could be liquidated in exchange for euros and used for spending purposes. Liquidation of TCC would take place against purchases of TCC by those who would provide euros in exchange for the right to the future tax cuts.
Robert Parenteau writes that when issuing tax anticipation notes the government is essentially securitizing the future tax liabilities of its citizens, and creating what amounts to a tax credit. This tax credit will not be counted as a liability on the government’s balance sheet (British consols are a historical example of this), and will not require a stream of future interest payments. Thomas Mayer writes that demand for special government debt can be created by requiring employers to pay any increase in the minimum wage in this denomination. To protect banks’ balance sheets, the domestic authorities could tax withdrawal of deposits and money transfers abroad at the rate of the discount of the new means of payment to the euro in the market.
Thomas Mayer writes that as labor costs would accrue in part in euro and in another part in the parallel currency, labor costs composed of both euro and parallel currency would decline against labor costs in euro only. This would raise competitiveness and especially help labor-intensive exports (e.g. tourism).

Historical examples

Thomas Mayer writes that there are historical examples of a parallel currency introduced during periods of financial stress, only to disappear later. For instance, California in 2009 paid debt in IOUs that circulated temporarily as a parallel currency to the US dollar. The state repurchased these instruments against dollars after the financial tensions had eased. Also, during the US Civil War, the Union states in the north introduced United States Notes to fund war costs. These notes, dubbed ‘Green Backs’, circulated as currency in parallel to the Gold dollar and were later repurchased by the US government. Against this experience, Argentinian provinces issued IOUs during the debt crisis of 2001. But this was only a prelude to the abandoning of the peso-dollar exchange rate link and the introduction of a floating exchange rate regime for the Argentinian currency.
Biagio Bossone and Marco Cattaneo write that none of those attempts have been carried out on large enough of a scale to successfully address the competitiveness problem, and certainly not in the framework of a monetary union managing a parallel currency in an agreed process with the other member states.  J.P. Koning writes that Alberta in 1936 and Greece in 2015 are in similar situations. Both are non-currency issuers within a larger monetary zone. Both have awful credit. Neither is part of a larger fiscal union.  In early August 1936, when the program debuted, an unemployed Albertan was paid, say, a $1 certificate for each $1 worth of road maintenance work rendered. This certificate was to be redeemed by the Alberta government two years hence, or in August 1938, for $1 in Canadian dollars.

A hard thing to do in practice

J.P. Koning writes that the issuance of parallel currencies seems like a hard battle to win as anyone planning a Greek parallel currency faces a conundrum. In order to pay its bills the government can do little more than introduce a volatile asset that trades at varying discount to euros. This asset's volatility and relative illiquidity won't make it very popular with its recipients. An attempt to render that asset more acceptable in trade by setting a one-to-one conversion rate to the euro will result in a short-circuiting of the scheme as everyone races to redeem IOUs.
J.P. Koning writes that if the IOUs trade at a variable discount to euros, then their ability to serve as a competing medium of exchange will suffer. This lack of liquidity militates against one of the key selling points of a Greek parallel unit, which is to finance the government by displacing some of the existing circulating medium of exchange, euros, from citizens' wallets. Preferably, unwanted euros would trickle back to the European Central Bank to be cancelled, reducing the ECB's seigniorage but augmenting the seigniorage of the Greek state as Greek IOUs rush in to fill the void. However, if the new Greek parallel unit cannot compete with the euro's liquidity, then there will be very little 'space' for Greek IOUs to occupy in Greek portfolios, and little relief for beleaguered government finances.
J.P. Koning writes that if the Greek government tries to promote the liquidity of its parallel currency by having the units trade at a fixed one-to-one rate with euros, then a garbled version of Gresham's Law would overwhelm Greece. The Syriza government's willingness to buy bad money from the public with good money will promote mass conversion into euros and thereby drive all the bad money from circulation. Greek parallel units will cease to exist.
Robert Parenteau writes that the discount would reflect risks that Greece either change its mind about accepting its own debt for tax payments, or that it would suspend the roll over, essentially defaulting on this new class of debt. Tyler Cowen writes that the problem is that of credibility.  Even seeing a new currency, no matter what the plan, could cause people to think their bank accounts will be redenominated, leading to bank runs.